Mismanagement, waste, graft, and corruption: How’s the city doing?

Today, Halifax city Auditor General Larry Munroe released his report, A Performance Review of HRM’s Equipment Fuel Program, to council’s Audit and Finance Committee. Mid-point in Munroe’s presentation to the committee, the report was posted on the city’s website. You can read it here.

I was at the committee meeting, along with all the other municipal reporters in town. The TV cameras were rolling, too. Undoubtedly right at this very moment all the reporters, myself included, are typing up their articles, and by the mid-afternoon top of the hour news breaks, we’ll be hearing breathless reports about the mismanaged—unmanaged, really—fuel program. I wonder who will be the first to say on air: “How much fuel was misappropriated? We just don’t know!” Heck, I’d probably say it myself, if I were on the radio.

Hey wait, I will be on the radio, at 4pm on Sheldon MacLeod’s talk show on 95.7. I’ll say it then: “How much fuel was misappropriated? We just don’t know!”

But let’s catch our breath, slow down for a moment, and consider: just how big of a problem is financial mismanagement, waste, graft, and corruption at City Hall?

In one sense, the question is a little bit ridiculous. Some people will say any financial irregularities are a problem, but an institution as large as the city will always have some degree of financial irregularity. City Hall is filled with humans, after all, and human institutions fail. That’s the nature of it.

My semi-informed guess is that financial mismanagement is far worse in the private sector, but businesses aren’t governed by public reporting laws and don’t generally have prying reporters poking around, so we can’t really know for sure—but that’s precisely why it’s worse in the private sector. Problems at City Hall get discovered, at least sometimes, and at least some attempt is made to fix them, while problems at The Blog, Inc. go undiscovered, and when they are discovered they are typically covered up. And no, the “miracle of the market” is not a self-corrective force.

The history of financial irregularity at City Hall

In terms of Halifax city government, some historic context helps understand where we are now. Truly, after amalgamation, things were out of control. Debt skyrocketed, there were no meaningful debt policies in effect, and no one much at City Hall knew what anyone else was doing. It didn’t help that a cabal of old boys ran the place, and any problems were swept under the rug.

How bad were things? Consider this: today, the audit committee had to write off an un-collected provincial payment of $706,000. Back in 2003, the city entered into a multi-partner agreement for the establishment of the $13.3 million MetroLink system. The city was to pay about $8 million, the federal government about $4 million, with the balance from several other sources, but mostly the provincial government. The city was the lead agency, so paid out all expenses. The $706,000 was supposed to be a provincial payment, but City Hall simply never bothered to collect it. For what it’s worth, George McLellan was then CAO. He’s now in charge of our ambulance services.

Things started tightening up when Cathie O’Toole took the reins as Finance Director, in December of 2008. Her work was mostly unsung, but she patiently brought fiscal discipline to City Hall, implementing the kind of debt control and financial management systems that most large organizations have as a matter of practice.

Two gigantic scandals erupted during the O’Toole years.

The first was the Washmill Underpass fiasco. There’s an awful lot to say about that, but the most important thing for our purposes now is that it involved then-CAO Dan English approving, on his own authority, over $8 million in expenditures, even though that sent the project ridiculously over-budget. And English failed to ever tell city council about the problem. English was retiring, but his replacement, Wayne Anstey, also failed to tell council about the cost overruns, until he had no choice. That’s just how things were done back in the day: the old boys (English and Anstey were the epitome of the old boys) covered for each other, they made problems go away, shifted budgets around to cover up mistakes, whatever it took.

O’Toole played no active part that I’m aware of in the Washmill scandal, but the issue has been bouncing around City Hall ever since. In fact, Auditor General Larry Munroe has written an in-depth report on it. That report was initially to be published in April, but now won’t come out until October. I’m told the delay comes because the city’s legal department had to be involved—That means we’re going to have very big news on this in a matter of weeks. It might even mean criminal prosecutions.

The other big scandal came in 2010, when Anstey approached O’Toole hat-in-hand, asking her to deal with some $400,000 in disappeared funds. The money was related to the concerts on the Common, and represented two uncollected loans made in a scheme dreamed up by Trade Centre Limited president Scott Ferguson and approved by then-Mayor Peter Kelly and Anstey. The trio had no authority to make the loans, did not inform council about them, acted outside the normal city financial controls, and without O’Toole’s knowledge. But here was Anstey, asking O’Toole to make it go away.

Again, that’s how things were done back in the day: the old boys covered for each other, they made problems go away, shifted budgets around to cover up mistakes, whatever it took. I have no doubt that the Finance Directors before O’Toole would’ve played ball, and done as directed.

O’Toole, however, would have none of it. She reported the concert loan scheme to Munroe and the Audit Committee, insuring that the issue would become public, and indeed it did, at a explosive city council meeting in March of 2011. The rest is history.

I’ve singled out O’Toole in this chronology, but council itself should be credited with recognizing the financial problems, implementing O’Toole’s recommendations, and continuing down the path towards fiscal responsibility.

O’Toole didn’t care for the political spotlight, and moved over to Halifax Water. She was replaced by Greg Keefe, an affable fellow who doesn’t need to work at the city, but trudges along plugging the ever-smaller financial holes he finds.

Also credited should be CAO Richard Butts. Whatever his faults, in terms of financial management, he’s in tight control. Probably too tight, but that’s another issue.

The missing 2003 MetroLink funds were discovered thanks to increasing scrutiny of capital projects, and cleaning up old books. In that respect, the fact that council is writing off $706,000 is good news.

To recap: in terms of fiscal management, City Hall is light years ahead of where it was a decade ago.

I typed that with trepidation. There will always be fiscal problems in municipal government, and there will be scandal from time to time. Sometimes gigantic scandal. Given time, I’m sure I’ll be once again covering some horrific financial scandal at City Hall. That’s just how things work. But the point remains: this is no longer the out-of-control system run haphazardly by old boys. It just isn’t.

Equipment fuel

Which brings us to today’s auditor general’s report, on the (non)management of equipment fuel.

The fuel issue represents just $4 million in an annual city budget approaching a billion dollars. This tells you just how far we’ve come along, in terms of fiscal management. Munroe seemed almost to apologize for even bothering with it, but as he pointed out, value for money, even relatively small amounts of money, matters.

Besides, everyone knows it’s an easy-to-understand issue that the press and the public will jump on: City workers are stealing gas! This is retro, old-school stuff. Read screaming headlines, hear breathless reporters.

And fair enough. It almost seems comical, but for reasons that make sense but would be impossible to explain in the 20 minutes I have before leaving for the radio studio, about a year or so ago the tightening of financial controls actually led to the elimination of the best controls on the fuel program.

Here’s the story in quick outline: The city has 11 fuel depots, where city employees fill up their vehicles and equipment (lawn mowers, snow blowers, what have you). In order to access that fuel, employees are issued “fobs,” little plastic dealies they wave in front of the tanks to activate them. The employees are supposed to also note mileage.

Additionally, some fuel cards for private filling stations are issued for use of equipment far from the city fuel depots. These are primarily issued to the fire department.

There are 1,146 fobs issued, but a bunch of those have been inactive, a bunch of others have been lost, and there’s no tracking of any of it. The situation is particularly bad in the police department, where there are 20 fobs listed as “miscellaneous.” “The reason given for this exception,” says Munroe’s report. “was HRP ‘loses’ so many fuel fobs it is necessary to have that many active fobs on hand so there is no waiting to get replacement fobs. Between April 1, 2011 and September 19, 2012, HRP was issued 142 fuel fobs.”

Moreover, there’s essentially no controls on the fobs. They’re thrown in an unlocked drawer for anyone to use. Fobs aren’t assigned to specific equipment, and no one knows what size tanks the equipment has, so it’s impossible to know if more fuel is pumped than the equipment can hold.

A similar situation exists with the fuel cards. Multiple people use the cards, so the PIN is written on the back of the card. Cards are being used at filling stations very close to the city’s fuel depots. No one checks to see if fuel is being purchased after normal working hours. And on and on.

“Can we tell if these [fobs] are being used for personal vehicles?” councillor Stephen Adams asked Munroe. Munroe took a long pause—I swear, it must have been 15 seconds, an eternity at such a meeting. “We saw no evidence for that,” he said finally, explaining that the complete lack of documentation or controls made it impossible for his investigators to make such an allegation.

The sense of it was that Munroe thought it was likely that employees were filling their personal vehicles with city gas, but wasn’t able to prove it. Still, he added, even though there were no controls to prevent people stealing gas, everyone thought there were such controls, so probably there was a lot less stealing than there would be if everyone knew there were no controls.

So there’s that.

I don’t mean to make light of the fuel issue. It’s real, and it needs to be addressed. But this is where we’re at with city fiscal controls now: relatively mundane issues like Buddy splashing a few litres in his truck after filling the lawnmower are the issues of the day. This is great news, actually.

Well, until a real scandal erupts. Which it will.